August 2003

Grant Results

National Program

Changes in Health Care Financing and Organization

SUMMARY

In 1996–1999, investigators at the Urban Institute, Washington, investigated the effectiveness of the nation's health insurance system in providing coverage for older Americans using data from the 1992–1994 Health and Retirement study.

Only one-third of persons retiring from public sector jobs can depend on health insurance through their former employers.

The project was part of the Robert Wood Johnson Foundation's (RWJF) national program Changes in Health Care Financing and Organization (HCFO) (for more information see Grant Results).

Key Findings
Researchers reported the following in a Findings Brief:

  • About one-quarter of retirees experienced a change in health insurance coverage after retirement.
  • Workers who expected large premium increases at retirement were significantly less likely to retire early than those who anticipated modest cost increases.
  • Even those workers who received retiree health insurance benefits found the average cost of coverage to increase compared to the cost of coverage while employed.
  • Retirement rates for men with employer-sponsored health insurance, but not retiree health insurance, were substantively lower than for men with retiree health insurance.
  • The effect on early retirement decisions of a proposed program that would allow under-65 retirees to buy into Medicare post-COBRA depends upon premium costs.

Funding
RWJF provided a $174,396 grant to support this project.

 See Grant Detail & Contact Information
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THE PROJECT

Researchers from the Urban Institute in Washington examined trends in employer-provided retiree health insurance and their impact on workers retiring before age 65 (when they become eligible for Medicare). Researchers also examined the effect of changes in health insurance premium costs related to COBRA or to Medicare reforms (including a proposed option for retirees younger than 65 to buy into Medicare) on people's decision to retire prior to age 65. COBRA — the Consolidated Omnibus Budget Reconciliation Act of 1986 — gives former employees the right to purchase their employer's group health coverage on an individual basis for 18 months after termination of employment.

Investigators used data from the University of Michigan-based Health and Retirement Study to construct a nationally representative sample of full-time workers who were age 55 to 61 in 1992, who were then re-interviewed in 1994. Employer-sponsored health insurance covered about 88 percent of participants; about 60 percent also had retiree health insurance. Approximately 25 percent of full-time workers who received employer-sponsored health insurance reported that they would not be provided with retiree health insurance. Approximately 5 percent of full-time workers in the sample purchased insurance through non-group policies, and about 7 percent were uninsured.

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FINDINGS

Researchers reported the following in a Findings Brief:

  • About one-quarter of retirees experienced a change in health insurance coverage after retirement. The percentage who were uninsured after retirement increased from 7 to 13 percent.
  • Workers who expected large premium increases at retirement were significantly less likely to retire early than those who anticipated modest cost increases. A 50 percent increase in premium costs results in a 7 percent reduction in retirement rates for men and a 10 percent reduction for women.
  • Even those workers who received retiree health insurance benefits found the average cost of coverage to increase compared to the cost of coverage while employed. For example, the average cost of a male retiree's share of health benefits (in 1994 dollars) increased by approximately $100 per month after retirement to a total out-of-pocket monthly cost of $160 per month. Without retiree health insurance the increase was even greater. After expiration of COBRA eligibility, monthly out-of-pocket insurance costs grew almost $200 to a total of $250. The monthly premium for individual (non-COBRA) coverage was about $300 for healthy men and more than $400 for men with health problems.
  • Retirement rates for men with employer-sponsored health insurance, but not retiree health insurance, were substantively lower than for men with retiree health insurance.
  • The effect on early retirement decisions of a proposed program that would allow under-65 retirees to buy into Medicare post-COBRA depends upon premium costs. If premiums were set high enough so that the buy-in program was cost-neutral and did not require subsidies from the rest of the Medicare program, the effects on early retirement would be quite small, increasing retirement rates for full-time workers with employer-sponsored health insurance but not retiree health insurance by no more than 6 percent. If Medicare were to subsidize premiums for the bottom 20 percent of workers (by income), retirement rates would increase among workers age 55 to 61 by 17 percent for men and 18 percent for women.

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GRANT DETAILS & CONTACT INFORMATION

Project

Study of the Implications of Declining Employer Sponsored Health Insurance for Retirees

Grantee

Urban Institute (Washington,  DC)

  • Amount: $ 174,396
    Dates: May 1996 to April 1999
    ID#:  029201

Contact

Sheila R. Zedlewski
(202) 857-8657
szedlewski@ui.urban.org

Web Site

http://www.hcfo.net

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Report prepared by: Mary Geisz
Reviewed by: Robert Crum
Reviewed by: Molly McKaughan
Program Officer: Nancy L. Barrand

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